Tennessee Sports Betting Could Arrive In July, But At What Cost?

Written By Nicholaus Garcia on April 25, 2020 - Last Updated on February 12, 2021

A skilled journalist once wrote, “I think there is a terrible angst on the land, a sense that something ugly is about to happen, an hour-to-hour feeling of nervous anticipation.” That was a bit of correspondence from Hunter S. Thompson to a friend in 1965. Though he was referring to Richard Nixon and not the anticipated launch of Tennessee sports betting, the similarities are there if you look hard enough.

Online sports betting in Tennessee is expected to make its official debut in July. However, it will come with a stain, at least in the eyes of experts who analyze the markets.

Tennessee sports betting rules at a glance

As reported by Play Tennessee, embedded within the rules and regulations is a clause that caps the amount a bettor can win at 90 percent. This means Tennessee will be the first state to mandate that sportsbooks generate a 10 percent hold.

But the rules established by the TN Education Lottery Corporation don’t stop there. Operators must also pay an annual licensing fee of $750,000 and will be taxed at 20 percent.

Here are those numbers compared to other states:

  • Nevada — 6% hold
  • New Jersey — 7% hold / $100,000 licensing fee
  • Pennsylvania — $10 million licensing fee / 36% tax rate
  • Illinois — $20 million licensing fee / 25% tax rate

While some states may have outrageous tax rates and substantial licensing fees, the main constant is none require a 10 percent hold.

But there is a safety valve of sorts. Rules can be revisited in a year’s time so if everything turns to ash, there is a way to rebuild.

The benefit of the doubt

One must understand, a politicians’ first duty is to the state. How much tax revenue can a product bring in? How many jobs can it create? These are fundamental questions asked by lawmakers across the country.

A detailed report from Eilers & Krejcik, an independent research and consulting firm, predicted a $10.9 million annual loss as a result of the initial 15 percent hold requested by the lottery corporation. That is a hefty chunk of change. In the current economic climate, it would be wise not to leave such a massive sum on the table.

But upon further analysis, several models in the report show total revenue significantly declining, going from as high as $55.5 million to as low as $30.7 million.

However, total tax revenue jumps from as low as $23.2 million to as high as $45.3 million, and that is the key.

Tax revenue is what makes elected officials salivate. Money brought into the state creates praise. Praise creates money for state coffers. The more money in state coffers means more political clout. And with more clout, means more votes. And votes are what keep elected officials in power.

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Is the TN sports betting launch two months away?

While the exact date of launch has yet to be revealed, Tennessee residents have a little over two months to prepare for a version of sports betting that will be completely mobile. Yes, another first. Tennessee will only have online sports betting with no retail options available.

But like the rest of the country, they’re waiting for the return of sports. For now, there are limited options in the gambling sphere.

As mentioned before, the unfortunate stain will be the limited winning payout and an operator’s ability to offer competitive pricing. Think of it this way, if the odds on the legal sports betting market are -125, that means a bettor must wager $125 to win $100. If they can get better odds on the illegal market on the same match, which do you think they will go for?

The one thing bettors have going for them is geographical location. Arkansas and Mississippi are to the south, and Illinois sports betting to the north, all with legal, regulated sports betting to some capacity. It’s highly expected that some bettors, not all, will take advantage of these gaming markets.

In the end, sure, some politicians may genuinely want to cut into the black market. Some may even want to implement stronger consumer protections and give generously to responsible gaming initiatives. But the bottom line will always be: how many jobs will be created and how much money will be brought in.

Nicholaus Garcia Avatar
Written by
Nicholaus Garcia

Nick has had stints in Chicago and Washington, D.C., writing about politics, financial markets, and sports betting. He graduated from Texas Tech University and completed his master's degree in journalism at Columbia College Chicago.

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